UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission file number 0-20141
Mid Penn Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1666413
(State or other jurisdiction of (IRS Employer ID No)
Incorporation or Organization)
349 Union Street, Millersburg, PA 17061
(Address of principal executive offices) (Zip Code)
(717) 692-2133
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the
classes of common stock, as of the latest practical date.
2,893,197 shares of Common Stock, $1.00 par value per share,
were outstanding as of March 31, 1999.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)
<CAPTION>
March 31, Dec. 31,
1999 1998
-------- --------
<S> <C> <C>
ASSETS:
Cash and due from banks 4,575 5,651
Interest bearing balances 39,909 42,883
Available-for-sale securities 69,620 67,933
Federal funds sold 0 0
Loans 152,526 152,993
Less:
Allowance for loan losses 2,357 2,313
------- -------
Net loans 150,169 150,680
------- -------
Bank premises and equip't, net 3,436 3,498
Other real estate 174 347
Accrued interest receivable 2,051 1,907
Cash surrender value of life insurance 3,947 3,900
Other assets 1,356 1,028
------- -------
Total Assets 275,237 277,827
======= =======
LIABILITIES & STOCKHOLDERS EQUITY:
Deposits:
Demand 21,433 20,971
NOW 26,647 28,234
Money Market 20,174 17,158
Savings 26,058 25,305
Time 129,631 125,134
------- -------
Total deposits 223,943 216,802
------- -------
Short-term borrowings 5,848 12,159
Accrued interest payable 1,594 1,240
Other liabilities 1,216 540
Long-term debt 15,513 15,550
------- -------
Total Liabilities 248,114 246,291
------- -------
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share;
authorized 10,000,000 shares; issued
2,912,267 shares at March 31, 1999 and
December 31, 1998 2,912 2,912
Surplus 17,181 17,181
Undivided profits 7,703 11,640
Unrealized holding gain on securities,
net of estimated tax effect -139 344
Less: Treasury Stock at cost
(19,319 and 19,241 shs., resp.) 534 541
------- -------
Total Stockholders Equity 27,123 31,536
------- ------
Total Liabilities & Equity 275,237 277,827
======= =======
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; dollars in thousands)
<CAPTION>
Three Months
Ended March 31,
1999 1998
<S> <C> <C>
INTEREST INCOME: ----- -----
Interest & fees on loans 3,347 3,508
Int.-bearing balances 633 615
Treas. & Agency securities 625 569
Municipal securities 324 229
Other securities 29 12
Fed funds sold and repos 0 8
----- -----
Total Int. Income 4,958 4,941
----- -----
INTEREST EXPENSE:
Deposits 2,111 2,176
Short-term borrowings 80 86
Long-term borrowings 212 116
----- -----
Total Int. Expense 2,403 2,378
----- -----
Net Int. Income 2,555 2,563
PROVISION FOR LOAN LOSSES 75 29
----- -----
Net Int. Inc. after Prov. 2,480 2,534
----- -----
NON-INTEREST INCOME:
Trust Dept 18 8
Service Chgs. on Deposits 125 100
Investment sec. gains, net 50 5
Other 261 308
----- -----
Total Non-Interest Income 454 421
----- -----
NON-INTEREST EXPENSE:
Salaries and benefits 979 837
Occupancy, net 89 82
Equipment 115 123
PA Bank Shares tax 69 79
Other 403 525
----- -----
Tot. Non-int. Exp. 1,655 1,646
----- -----
Income before income taxes 1,279 1,309
INCOME TAX EXPENSE 327 368
----- -----
NET INCOME 952 941
===== =====
Other Comprehensive Income, net
of tax:
Unrealized holding losses on
securities arising during the
period -483 -37
Less: reclassification
adjustments for gains included
in net income 50 5
----- -----
Other comprehensive income -533 -42
----- -----
Comprehensive Income 419 899
===== =====
NET INCOME PER SHARE 0.33 0.33
===== =====
Weighted Average No. of
Shares Outstanding 2,893,246 2,892,107
</TABLE>
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; Dollars in thousands)
<CAPTION>
For the three months ended:
March 31, March 31,
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net Income 952 941
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for loan losses 75 29
Depreciation 100 90
Loss (gain) on sale of investment
securities -50 0
Loss (gain) on sale/disposal of bank
premises and equipment 0 0
Loss (gain) on the sale of foreclosed
assets -59 -209
Change in interest receivable -144 186
Change in other assets -328 -78
Change in interest payable 354 271
Change in other liabilities 676 459
Other, net 233 218
------- -------
Net cash provided by
operating activities: 1,809 1,907
------- -------
Investing Activities:
Net decrease in int-bearing balances 2,974 -7,327
Proceeds from sale of securities 3,811 2,460
Proceeds from the maturity of secs. 1,463 924
Purchase of investment securities -7,680 -5,355
Net decrease in loans 460 -1,990
Net purchases of fixed assets -38 -404
Proceeds from sale of other real estate 221 1,128
Capitalized additions - ORE 0 0
------- -------
Net cash provided by
investing activities 1,211 -10,564
------- -------
Financing Activities:
Net increase in demand and savings 2,644 2,617
Net increase in time deposits 4,497 -2,864
Net increase in sh-term borrowings -6,311 3,452
Net increase in long-term borrowings -37 4,966
Cash dividend declared -4,889 -495
------- -------
Net cash provided by
financing activities -4,096 7,676
------- -------
Net increase in cash & equivalents -1,076 -981
Cash & cash equivalents, beg of period 5,651 6,998
------- -------
Cash & cash equivalents, end of period 4,575 6,017
======= =======
Supplemental Noncash Disclosures:
Loan charge-offs 42 5
Transfers to other real estate 0 0
</TABLE>
<PAGE>
Mid Penn Bancorp, Inc.
Notes to Consolidated Financial Statements
1. The consolidated interim financial statements included
here have been prepared by the Company, without audit,
according to the rules and regulations of the Securities and
Exchange Commission with respect to Form 10-Q. The
financial information included here reflects all
adjustments (consisting only of normal recurring
adjustments) which are, in our opinion,
necessary for a fair statement of results for the
periods covered. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to these
rules and regulations. We believe, however, that the
disclosures made here are adequate so that the information
is not misleading. You should read these interim financial
statements along with the financial statements including the
notes included in the Company's most recent Form 10-K.
2. Interim statements are subject to possible adjustments
in connection with the annual audit of the Company's
accounts for the full fiscal year. In our opinion, all
necessary adjustments have been included so that the interim
financial statements are not misleading.
3. The results of operations for the interim periods
presented are not necessarily an indicator of the results
expected for the full year.
4. Management considers the Allowance for Loan Losses to be
adequate at this time.
<PAGE>
Mid Penn Bancorp, Inc.
Millersburg, Pennsylvania
Management's Discussion of Consolidated Financial Condition
for the three months ended March 31, 1999, compared to year-
end 1998 and the Results of Operations for the first quarter
of 1999 compared to the same period in 1998.
CONSOLIDATED FINANCIAL CONDITION
Total assets as of March 31, 1999, amounted to $275,237,000,
compared to $277,827,000 the total assets as of December 31,
1998.
During the first quarter of 1999, Management (we) applied
the proceeds of maturing interest bearing balances
(certificates of deposit of other banks) to pay down short-
term borrowings. We were able to reduce borrowings of less
than one year by $6,311,000 during the first quarter of
1999.
Loans remained fairly flat during the first quarter due to
some large payoffs in the commercial loan portfolio along
with a continued competitive pricing environment
Foreclosed assets held for sale (real estate owned by the
Corporation resulting from loan transactions) decreased to
$174,000 during the first quarter of 1999 due to the sale of
several lots of undeveloped land. These sales of other real
estate resulted in an after-tax gain of approximately
$39,000. As of March 31, 1999, the balance of foreclosed
assets held for sale consisted of undeveloped land and one
commercial property.
Total deposits increased by $7,141,000 during the first
three months of 1999. This increase was seen mainly in our
money market deposit accounts and in certificates of
deposit, particularly jumbo certificates issued to
municipalities.
As discussed, short-term borrowings, consisting of overnight
borrowings, decreased by $6.3 million from year end.
All components of long-term debt are advances from the FHLB.
Long-term debt advances were initiated in order to secure an
adequate spread on certain pools of loans and investments of
the Bank.
During the first quarter of 1999 our Board of Directors
declared a special cash dividend of $1.50 per share. This
special dividend is not expected to affect future regular
dividends. The special dividend was declared to reduce the
capital levels of Mid Penn Bancorp, Inc., increase return on
equity (ROE), and enhance shareholder value. We have
enjoyed a very solid capital position due to strong
financial performance. After payment of this special
dividend, Mid Penn will maintain capital levels well above
regulatory requirements. In the banking industry, there has
been a general shift from return on assets (ROA) to ROE as a
measure of financial performance. By lowering capital
through this special dividend, we will be improving ROE,
thus improving this ratio important to bank stock analysis.
We have also modified our employee performance incentives to
encourage activities that will emphasize earnings per share
and return on equity instead of our traditional return on
assets approach. We believe over time this change in
emphasis will improve performance measures that investors
utilize.
RESULTS OF OPERATION
Net income for the first quarter of 1999 was $952,000,
compared with $941,000 earned in the same quarter
of 1998. Net income per share for the first quarters of
both 1999 and 1998 was $.33. Net income as a percentage
of stockholders' equity, also known as return on equity,
(ROE), was 13.6% on an annualized basis for the first
quarter of 1999 as compared to 11.9% for the same period in
1998.
Net interest income of $2,555,000 for the quarter ended
March 31, 1999, remained flat compared to the $2,563,000
earned in the same quarter of 1998. Margins continued to
be challenged by strong rate competition for loans.
The Bank made a provision for loan losses of $75,000 and
$29,000 during the first quarters of 1999 and 1998,
respectively. Due to the cyclical nature of the economy
coupled with the Bank's substantial involvement in
commercial loans and the record number of nationwide
consumer bankruptcies, management thought it prudent to make
this allocation now during stronger economic times. On a
quarterly basis, senior management reviews potentially
unsound loans taking into consideration judgments regarding
risk or error, economic conditions, trends and other
factors.
Non-interest income increased to $454,000 for the first
quarter of 1999 over $421,000 earned during the same quarter
of 1998. A significant contribution to non-interest income
is insufficient fund (NSF) fee income. NSF fee income
contributed in excess of $90,000 during the first quarter of
1999. We also earned $50,000 resulting from the gain on the
sale of investment securities completed early in 1999.
Gains resulting from the sale of other real estate amounted
to $85,000 during the first quarter of 1999 in comparison to
the $192,000 earned during the same period of 1998.
Non-interest expense during the first quarter of 1999
remained flat despite the fact that we paid out in excess of
$120,000 in total additional employee bonuses to all
employees in conjunction with our performance-based employee
bonus plan. We had incurred several non-recurring expenses
during the first quarter of 1998 including $18,000 in legal
and administrative costs associated with the Bancorp's
merger with Miners Bank of Lykens, which became effective on
July 13, 1998. Additionally, the Corporation incurred
$20,000 in costs associated with the property held for sale
as other real estate, and in excess of $15,000 in finder's
fees for the hire additional Bank management talent during
this period of 1998.
LIQUIDITY
The Bank's objective is to maintain adequate liquidity while
minimizing interest rate risk. Adequate liquidity provides
resources for credit needs of borrowers, for depositor
withdrawals, and for funding Corporate operations. Sources
of liquidity include maturing investment securities,
overnight borrowings of federal funds (and Flex Line),
payments received on loans, and increases in deposit
liabilities.
Funds generated from operations contributed a major source
of funds for the first quarter of 1999 The major source of
funds came from the increase in time deposits, mainly the
$4,497,000 increase of jumbo certificates issued to local
government bodies. Other major sources of funds included
the $2,974,000 net decrease in investment certificates of
deposit, and the increase in demand and savings deposits of
$2,644,000.
The major use of funds during the period was a net decrease
in short-term borrowings of $6,311,000. The other major use
of funds was for the payment of the first quarter regular
and special dividend totaling $4,889,000.
CREDIT RISK AND ALLOWANCE FOR LOAN LOSSES
Total non-performing assets decreased to $2,909,000
representing 1.06% of total assets at March 31, 1999, from
$3,064,000 or 1.10% of total assets at December 31, 1998.
Most non-performing assets are supported by collateral value
that appears to be adequate at March 31, 1999.
The Allowance for Loan Losses at March 31, 1999, was
$2,357,000 or 1.55% of loans, net of unearned interest, as
compared to $2,313,000 or 1.51% of loans, net of unearned
interest, at December 31, 1998.
Based upon the ongoing analysis of the Bank's loan portfolio
by the loan review department, the latest quarterly analysis
of potentially unsound loans and non-performing assets,
we consider the Allowance for Loan Losses to be
adequate to absorb any reasonable, foreseeable loan losses.
YEAR 2000 COMPLIANCE: MANAGEMENT INFORMATION SYSTEMS
We have established a Year 2000 compliance committee to
address the risks of the critical internal bank systems that
are affected by date sensitive applications, as well as
external systems provided by third parties. A comprehensive
Year 2000 Business Action Plan was developed detailing the
sequence of events and actions to be taken as the Year 2000
approaches.
In November 1997, the Company purchased and installed an
upgrade to its current computer systems to improve
efficiencies of operations and position itself for future
growth. The cost of the new system was approximately
$284,000. Anticipated additional costs prior to year 2000
are estimated to be $47,000. Testing demonstrated that the
new hardware and software are Year 2000 compliant. In
addition, the Corporation has hired a third-party Year 2000
consultant. With the aid of the consultant, we have
developed a Year 2000 testing master plan, organization
chart and detailed work plan. The testing plan includes
several phases of testing in accordance with regulatory
guidelines. We successfully completed the testing of all
systems critical the operation of the bank on February 3,
1999.
<PAGE>
<TABLE>
MID PENN BANCORP, INC.
<CAPTION>
March 31, Dec. 31,
1999 1998
-------- --------
<S> <C> <C>
Non-Performing Assets:
Non-accrual loans 979 376
Past due 90 days or more 820 844
Restructured loans 936 1,497
------- -------
Total non-performing loans 2,735 2,717
Other real estate 174 347
------- -------
Total 2,909 3,064
======= =======
Percentage of total loans outstanding 1.90 2.00
Percentage of total assets 1.06 1.10
Analysis of the Allowance for Loan Losses:
Balance beginning of period 2,313 2,281
Loans charged off:
Commercial real estate, construction
and land development 0 40
Commercial, industrial and agricultural 20 200
Real estate - residential mortgage 0 40
Consumer 22 37
------- -------
Total loans charged off 42 317
------- -------
Recoveries of loans previously charged off:
Commercial real estate, construction
and land development 0 10
Commercial, industrial and agricultural 0 56
Real estate - residential mortgage 0 0
Consumer 11 29
------- -------
Total recoveries 11 95
------- -------
Net (charge-offs) recoveries -31 222
------- -------
Current period provision for
loan losses 75 254
------- -------
Balance end of period 2,357 2,313
======= ======
</TABLE>
<PAGE>
Mid Penn Bancorp, Inc.
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings - Nothing to report
Item 2. Changes in Securities - Nothing to report
Item 3. Defaults Upon Senior Securities - Nothing to report
Item 4. Submission of Matters to a Vote of Security Holders
- -Nothing to report
Item 5. Other Information - Nothing to report
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - (27) Financial Data Schedule
Reports on Form 8-K - None.
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Mid Penn Bancorp, Inc.
Registrant
/s/ Eugene F. Shaffer /s/ Kevin W. Laudenslager
By:Eugene F. Shaffer By:Kevin W. Laudenslager
Chairman, Pres. & CEO Treasurer
Date: May 12, 1999 Date: May 12, 1999
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4575
<INT-BEARING-DEPOSITS> 39909
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 69620
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 152526
<ALLOWANCE> 2357
<TOTAL-ASSETS> 275237
<DEPOSITS> 223943
<SHORT-TERM> 5848
<LIABILITIES-OTHER> 2810
<LONG-TERM> 15513
0
0
<COMMON> 2912
<OTHER-SE> 24211
<TOTAL-LIABILITIES-AND-EQUITY> 275237
<INTEREST-LOAN> 3347
<INTEREST-INVEST> 1611
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4958
<INTEREST-DEPOSIT> 2111
<INTEREST-EXPENSE> 2403
<INTEREST-INCOME-NET> 2555
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 50
<EXPENSE-OTHER> 1655
<INCOME-PRETAX> 1279
<INCOME-PRE-EXTRAORDINARY> 1279
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 952
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
<YIELD-ACTUAL> 8.1
<LOANS-NON> 979
<LOANS-PAST> 820
<LOANS-TROUBLED> 936
<LOANS-PROBLEM> 1979
<ALLOWANCE-OPEN> 2313
<CHARGE-OFFS> 42
<RECOVERIES> 11
<ALLOWANCE-CLOSE> 2357
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
